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The Primacy of Federal Authority at Superfund Sites After <i>ARCO v. Christian</i> The Primacy of Federal Authority at Superfund Sites After <i>ARCO v. Christian</i>

The Primacy of Federal Authority at Superfund Sites After ARCO v. Christian

Earlier this week, the Supreme Court issued an important decision delineating the scope of federal and state authority at Superfund sites in Atlantic Richfield Co. v. Christian, No. 17-1498, 590 U.S. ____ (U.S. Sup. Ct. April 20, 2020) ("ARCO"). In simple terms, the Court held that state tort claimants who are themselves liable under the Superfund law can still pursue their tort claims against another Superfund liable party so long as the remedy is money damages. But, those same state tort claimants cannot obtain relief in the form of a specific restoration plan or damages to fund such a plan unless the United States Environmental Protection Agency (“EPA”) has approved that plan. While initial reports of this decision emphasized the plaintiffs' ability to pursue their tort claims, the real story is the primacy of federal authority at sites subject to Superfund authority.

This case wound its way to the Supreme Court from the Anaconda Smelter Superfund Site near Butte, Montana. The site was one of the first put on the National Priorities List by EPA and encompasses over 300 square miles surrounding three copper smelters that operated for nearly 100 years ending in 1980. Under EPA oversight, the current owner of the former smelter property (ARCO) has performed major remediation work, including the removal of 10 million cubic yards of tailings, the capping in place of 500 million cubic yards of waste over 5,000 acres and the reclaiming of 12,500 acres of land. ARCO has also remediated more than 800 residential and commercial properties, and EPA estimates that additional remedial actions will continue at least through 2025.
Despite all this, 98 Montanans (the “plaintiffs”) who owned properties within the 300 square mile site boundary sued ARCO in state court for trespass, nuisance and strict liability. They claimed the smelters damaged their properties and asked the state court to require ARCO to fund a trust to the tune of $50 to $58 million so the trustee could pay for the plaintiffs’ proposed restoration plan. That plan would require additional remediation above and beyond what EPA has approved. For example, the plan would require arsenic in soil to be remediated to 15 parts per million (“ppm”) and also require the construction of an underground permeable barrier over 1.5 miles long to capture and treat shallow groundwater. By comparison, EPA set a target soil cleanup level of 250 ppm and rejected the underground barrier as too costly and unnecessary to secure safe drinking water. The plaintiffs sought the restoration damages as an alternative to the usual compensatory measures of property damage, including diminution in value, loss of use and enjoyment of the land and annoyance and discomfort. 

Seeking to halt the restoration plan that lacked EPA approval, ARCO brought two broad challenges to the plaintiffs’ tort claims. First, ARCO challenged the jurisdiction of the state courts to hear the claims on the grounds that exclusive federal jurisdiction applied. Second, it argued that the federal Superfund law (the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et. seq, or CERCLA) prohibited the plaintiffs from implementing their restoration plan without EPA approval. The Supreme Court rejected the first argument finding that plaintiffs’ claims were traditional state law claims that did not arise under CERCLA so that the exclusive federal jurisdiction clause of CERCLA § 113(b), 42 U.S.C. § 9613(b), did not apply. ARCO, Slip. Op., 8-10.

But, the Supreme Court agreed with ARCO that the plaintiffs were all current owners of property within the Superfund site and so were covered persons under CERCLA § 107(a), 42 U.S.C. § 9607(a), or “potentially responsible parties” (a/k/a PRPs), as that phrase is used throughout much of the rest of CERCLA. ARCO, Slip. Op., 14. In reaching that conclusion, the Supreme Court applied the statute’s definition of “facility,” which includes “’any site or area where a hazardous substance has been deposited . . . or otherwise come to be located.’”  Id., quoting 42 U.S.C. § 9601(9)(B). There could be no dispute that plaintiffs' properties were areas where hazardous substances had become located—after all that was the basis for their tort claims. From there, it was a simple step for the Court to conclude that plaintiffs, as PRPs, are prohibited by CERCLA § 122(e)(6) from taking remedial action at the Anaconda Smelter Superfund Site without obtaining authorization from EPA. ARCO, Slip Op., 13-14.That section applies the remedial action prohibition to any facility at which the President or a PRP, pursuant to an administrative order or consent decree, has begun a remedial investigation and feasibility study. 42 U.S.C. § 9622(e)(6). This prohibition primarily applies to Superfund National Priorities List sites, but it might also apply to sites over which the President has delegated his authority to EPA (whether or not on the National Priorities List), the Department of Defense or a number of other agencies.

The Court rejected arguments that a person covered by CERCLA § 107(a), but who is not liable because of a defense, is not a PRP. Thus, innocent purchasers and persons who have a statute of limitations defense are still PRPs to whom the Section 122(e)(6) prohibition applies. The Court found this approach implemented CERCLA's purpose of developing a single, comprehensive EPA-led cleanup rather than allowing myriad competing approaches. This approach to defining the category of PRPs could lead to some highly technical and curious results. 

Lenders who hold indicia of ownership to protect a security interest and do not participate in management of the facility are excluded from the definition of "owner or operator," 42 U.S.C. § 9601(20)(A) and (F), and thus seem not to be PRPs subject to the Section 122(e)(6) prohibition. Likewise, units of state or local government that acquire ownership or control of property through law enforcement seizure, bankruptcy, tax delinquency or certain other means and certain Alaska native villages and native corporations are excluded from the definition of "owner or operator" and thus seem not to be PRPs, as well. 42 U.S.C. § 9601(20)(D) and (E). 

In a similar vein, the Supreme Court acknowledged that a person who meets all of the requirements to be a "contiguous property owner" is not a PRP, by the express terms of 42 U.S.C. § 9607(q)(1)(A). But, where does that leave bona fide prospective purchasers ("BFPPs")?  Unlike Section 107(q)(1)(A), the statutory text for BFPPs does not say that they "shall not be considered to be an owner or operator." See 42 U.S.C. § 9607(q)(1)(C). And yet, these defenses appear in the same paragraph (107(q)) and the elements that a person must prove to be a BFPP substantially overlap with the elements that must be proved to be a contiguous property owner. Compare 42 U.S.C. §§ 9601(40)(B)(i)-(viii) (criteria for BFPPs) with 9607(q)(1)(A)(i)-(viii) (contiguous property owners). At first blush, it seems rather odd for BFPPs to be subject to the Section 122(e)(6) prohibition on remedial action while contiguous property owners are not. Perhaps this possible anomaly is entirely resolved by the requirement that contiguous property owners fully cooperate with EPA-approved remedies, 42 U.S.C. § 107(q)(1)(A)(iv),— a requirement that the Supreme Court found the Montana plaintiffs could not satisfy based on their restoration plan that lacked EPA approval.

The Court’s decision is a fairly straightforward application of the terms of CERCLA Sections 113(b) and 122(e)(6) as far as it goes. That said, it leaves open a number of important questions. EPA defined the Anaconda site to encompass 300 square miles surrounding the former smelters. Thus, there was no question that the plaintiffs were current owners of property within the site, which had an extraordinarily broad definition even by Superfund standards. Often, EPA does not formally define a site so broadly and leaves the precise extent of a Superfund site more ambiguous so that it need not send out liability notice letters to residential property owners adjacent to or near the core of a site. EPA usually proceeds in this manner even though it maintains that the facility or site is defined by the statutory definition that the Supreme Court applied in finding that the ARCO plaintiffs are PRPs. At many Superfund sites, this definition would bring in a number of nearby property owners who never received any notice of liability from EPA and never thought they were PRPs. By extension, that breadth also gives the remedial action prohibition in CERCLA § 122(e)(6) equally broad scope. There may be future cases where the extent of the Superfund facility is not so obvious that will lead to complex litigation as to whether the plaintiffs are also CERCLA PRPs.

While some early reports about ARCO have emphasized that the plaintiffs can pursue their tort claims, that emphasis overlooks the difficulties of pursuing a tort claim solely for damages other than restoration. The Montana plaintiffs clearly preferred a restoration measure of damages. That preference probably had much to do with the difficulty of proving diminished value to their properties or loss of use damages or damages due to annoyance or inconvenience or any of the other traditional measures of compensatory damages. Proving diminished value of a property will be difficult if the concentration of contaminants it contains today is the same as it was when the property was purchased and/or if the concentration is essentially the same as (or even less than) virtually all the surrounding properties. It will be even more difficult if plaintiff knows of the contamination when a property is purchased or knowledge of the contamination is widespread, as it was in the ARCO case. ARCO, Slip. Op., 21. It will also be difficult for plaintiffs to prove loss of use damages if they have continued residing in their properties for years or have never even attempted to use groundwater. In many instances, use of the groundwater may even be restricted by state or local law making proof of loss of use damages even more difficult. 

Further, those traditional measures of property damage are associated with "permanent" torts, whereas restoration damages are only available for "temporary" or "continuing" torts.  Sunburst School Dist. No. 2 v. Texaco, Inc., ¶¶ 30-31, 338 Mont. 259, 269, 165 P.3d 1079, 1086 (2007). Permanent property damage tort claims usually accrue from the completion of the structure or thing which constitutes or causes the nuisance or trespass. Christian v. Atlantic Richfield, 380 Mont. 495, 505, 358 P.3d 131, 140 (2015). And, where knowledge of the contamination is widespread, the statute of limitations is unlikely to be tolled by the discovery rule or similar doctrines. Id., 380 Mont. at 526-531, 358 P.3d at 154-157. The law regarding permanent versus temporary/continuing property damage claims and tolling of statutes of limitation is highly state-specific. Still, the Montana common law rules that led to the dispute about restoration damages going to the Supreme Court is enough to suggest the difficulties for plaintiffs posed by the ARCO decision.

The Supreme Court also suggested the plaintiffs could pursue their tort claims for the restoration damages if EPA approved the restoration plan. ARCO, Slip. Op., 19-20. But, if EPA approved a tort plaintiff's restoration plan as a Superfund remedial action, EPA would most likely negotiate with the likely tort defendant(s) to implement that action, which would leave little for the plaintiff to demand in its tort suit. If EPA alternatively ordered plaintiff to implement the plan or required the plaintiff to implement it under a consent decree, the state tort claim probably is entirely duplicative of a cost recovery or contribution claim under CERCLA §§ 107(a) or 113(f). Moreover, few tort plaintiffs will want to incur the burden of becoming subject to direct liability to EPA simply to bring a cost recovery or contribution claim under CERCLA. Either way, a tort claim for restoration damages would seem to have little incremental value once EPA approves the restoration plan as a Superfund remedial action.

These difficulties again point to the primacy of federal authority at National Priorities List sites and other sites at which the federal government exercises authority under the Superfund law.
If you have questions about the ARCO v. Christian decision or Superfund sites in general, please contact Tom Dimond, or any other member of Ice Miller's Environmental Group.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.
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